This rule is no longer applicable. Incorporated NYSE Rule 319 has been superseded by FINRA Rule 4360. Please consult the appropriate FINRA Rule.
(a) Each member organization doing business with the public shall carry fidelity bonds in such form and in such amounts as the Exchange may require covering its general partners or officers and its employees. The Stockbrokers Partnership Bond and the Brokers Blanket Bond approved by the Exchange, are the only forms which may be used. Specific Exchange approval is required for any variation from such forms.
(b) Each such member organization may self-insure to the extent of $10,000 or 10% of its minimum insurance requirement as fixed by the Exchange, whichever is greater, for each type of coverage required by the rule. This deductible may be taken without considering it as a debit item in the computation of net capital. Self-insurance in amounts exceeding the above maximum may be permitted by the Exchange provided the member or member organization certifies to the satisfaction of the Exchange that it is unable to obtain greater bonding coverage, and agrees to reduce its self-insurance so as to comply with the above stated limits as soon as possible, and appropriate charges to capital are made pursuant to Exchange Act Rule 15c3-1.
(c) Member organizations subject to this rule are required to maintain basic and specific coverage, which apply both to Stockbrokers Partnership Bond and Brokers Blanket Bond, in amounts not less than those prescribed in this Rule. Where applicable, such coverage must also extend to limited partners as employees, outside organizations providing electronic data processing services and the handling of U.S. government securities in bearer form.
(d) Each member organization that introduces all customers' accounts on a fully disclosed basis must maintain minimum coverage as follows:
(i) Minimum basic coverage for such member organizations whose net capital requirement under
[Rule 325]:
A. does not exceed $670,000 shall be the greater of $25,000 or 120% of their net capital requirement.
B. exceeds $670,000 shall be determined by the schedule set forth in paragraph (e) of this rule.
(ii) Specific coverage for such member organizations shall be as follows:
A. Misplacement and Check Forgery-the amount of basic bond minimum requirement.
B. Fraudulent Trading (not required of partnerships having no employees)-the greater of $25,000 or 50% of the basic bond minimum requirement, up to $500,000.
C. Securities Forgery-the greater of $25,000 or 25% of the basic bond minimum up to $250,000.
(e) Each member organization which carries customers' accounts must maintain minimum coverage as follows:
(i) Minimum basic coverage for such member organizations shall be based on their net capital requirement under
[Rule 325] as follows:
| Net Capital Requirement Under Rule 325 |
Basic Minimum Coverage |
| $ 25,000–50,000 |
$ 200,000 |
| 50,001–100,000 |
300,000 |
| 100,001–200,000 |
500,000 |
| 200,001–300,000 |
600,000 |
| 300,001–500,000 |
700,000 |
| 500,001–1,000,000 |
800,000 |
| 1,000,001–2,000,000 |
1,000,000 |
| 2,000,001–3,000,000 |
1,500,000 |
| 3,000,001–4,000,000 |
2,000,000 |
| 4,000,001–6,000,000 |
3,000,000 |
| 6,000,001–12,000,000 |
4,000,000 |
| 12,000,001–and higher |
5,000,000 |
(ii) Specific coverage for such member organizations shall be as follows:
A. Misplacement and Check Forgery—the amount of the basic bond minimum requirement.
B. Fraudulent Trading (not required of partnerships having no employees)—the greater of $100,000 or 50% or the basic bond minimum requirement, up to $500,000.
C. Security Forgery—the greater of $100,000 or 25% of the basic bond minimum requirement, up to $250,000.
• • • Supplementary Material: --------------
.10 The highest net capital requirement during the preceding twelve months, based upon either the basic or alternative method for computing net capital requirements, whichever is applicable, shall determine the minimum required coverage for the succeeding twelve month period. Required coverage may be redetermined as of the yearly anniversary date of the bond. If a replacement bond becomes necessary, coverage must be redetermined upon issuance of such bond, and thereafter such coverage shall be redetermined annually as of the anniversary date of the replacement bond.
.11 Each member organization will be expected to review carefully any need for coverage greater than that provided by the required minimums. Where experience or the nature of the business warrants additional coverage the Exchange expects it will be acquired.
.12 Each member organization subject to this rule shall immediately advise the Exchange in writing if its insurance is entirely or partially canceled.
In addition, each bond shall contain a provision that the insurance carrier will use its best efforts to notify the Exchange in the event the bond is canceled, terminated or substantially modified.*
* The term "substantially modified" shall mean any change in the type or amount of fidelity bonding coverage, or in the exclusions to which the bond is subject, or any other change in the bond such that it no longer complies with the requirements of this rule.
